THE PREEMPTIVE RIGHTS DISCUSSED BELOW RELATE TO COMMON SHARES THAT ARE SECURITIES OF A BRAZILIAN ISSUER. THE OFFER IS SUBJECT TO DISCLOSURE REQUIREMENTS OF BRAZIL THAT ARE DIFFERENT FROM THOSE OF THE UNITED STATES.

IT MAY BE DIFFICULT FOR YOU TO ENFORCE YOUR RIGHTS AND ANY CLAIM YOU MAY HAVE ARISING UNDER THE FEDERAL SECURITIES LAWS, SINCE THE ISSUER IS LOCATED IN BRAZIL, AND SOME OR ALL OF ITS OFFICERS AND DIRECTORS ARE RESIDENTS OF BRAZIL. YOU MAY NOT BE ABLE TO SUE THE ISSUER OR ITS OFFICERS OR DIRECTORS IN A BRAZILIAN COURT FOR VIOLATIONS OF THE U.S. SECURITIES LAWS. IT MAY BE DIFFICULT TO COMPEL THE ISSUER AND ITS AFFILIATES TO SUBJECT THEMSELVES TO A U.S. COURT’S JUDGMENT.

BANCO DO BRASIL S.A.

Notice to Shareholders

Preemption Rights for the Subscription of Shares in a Primary Public Offering

Banco do Brasil (the “ Bank ”) informs its registered holders (“Shareholders”) that, pursuant to a resolution passed at its Extraordinary General Shareholders’ Meeting on May 19, 2010, a preemption right (“ Preemption Right ”) was granted to each current holder of a common share of the Bank (“ Common Share ”) for the subscription of a new Common Share that will be offered by the Bank in the primary portion of a primary and secondary public offering of Common Shares (the “ Offering ”), pursuant to Article 171 of Law 6,404 of December 15, 1976 and subsequent amendments (the “ Brazilian Corporations Law ”).

Shareholders considering exercising their preemptive rights should note the following:

a) Holders of Preemption Rights: To ensure the participation of shareholders in the primary portion of the Offering (the “ Primary Offering ”), the holdings of record with the BM&FBOVESPA – Stock, Commodities and Futures Exchange (“BM&FBOVESPA”) and the depository institution with respect to the Common Shares as of the end of May 24, 2010 (“ First Cut Date ”) and as of the end of June 18, 2010 (“ Second Cut Date ”) will be used. With respect to Shareholders of record as of the First Cut Date, if the respective shareholding position undergoes any change between the First Cut Date and the Second Cut Date, the Shareholder’s respective Proportional Subscription Limit (as defined below) will change to the same extent as that the Shareholder’s holdings of record changes between the First Cut Date and the Second Cut Date.

b) Period to exercise the preemptive right: Shareholders may exercise their Preemption Rights by filing the specific form (“ Preemption Right Exercise Reservation Form ”) intended for the exercise of such right, within a three-day period between June 21, 2010, the date on which the Notice to the Market of the Offering is republished, and June 23, 2010, the expiration of the Preemption Right (“ Preemption Right Exercise Reservation Period ”).

c) Subscription Limit: Each Shareholder filing a Preemption Right Exercise Reservation Form during the Preemption Right Exercise Reservation Period is assured the right to subscribe for shares in the Primary Offering in an amount equal to the percent ownership interest of such Shareholder in the all Common Shares, rounding up fractional Shares (“ Proportional Subscription Limit ”). Because the aggregate Proportional Subscription Limit is 11.129% per share, Shareholders who exercise their Preemption Rights will be entitled to subscribe for 0.11129 shares issued within the scope of the Offering, for each share held between the First Cut-Off Date and the Second Cut-Off date. There is no minimum investment requirement and the maximum amount is subject to the respective Shareholder’s Proportional Subscription Limit. If the Central Bank does not approve the Bank’s capital increase before the expiration of the Preemption Right Exercise Reservation Period, the Offering may be settled through

delivery of securities deposit certificates (“ Units ”) consisting of five shares and 13 subscription receipts, each unit which will be entitled to receive a Common Share upon receipt of subscription (“ Subscription Receipts ”). In case Units are issued, the number of Units to be delivered to each Shareholder exercising its Preemption Right will be the number of shares included in its Reservation Forms divided by the number of shares plus the Subscription Receipts underlying each Unit, rounding up fractional shares, in the case of Shareholders who have exercised their Preemption Right. In the event of settlement with Units, each Shareholder who has filed a Preemption Right Exercise Reservation Form will receive (i) Units in number corresponding to its Proportional Subscription Limit divided by the number of shares and Subscription Receipts underlying each Unit and (ii) as many Common Shares as may be required so that, after delivery of the Units referred to in item (i) above, the Proportional Subscription Limit is fully met. Banco do Brasil will publish, if applicable, on the first day immediately following the date of publication of the Announcement of Commencement of the Offering, notice to the market in Brazil notifying of the delivery of Units in lieu of shares.

d) Where to exercise the preemptive right: Shareholders maintaining their Common Shares in a custody account with any Engaged Institution for the Offering (as defined in the Notice to the Market with respect to the Offering) may file Preemption Right Exercise Reservation Forms with any single Engaged Institution, the deposit intended investment amount being unnecessary, as may be stipulated by each Engaged Institution. Those Shareholders who do not maintain their shares in Banco do Brasil with any Engaged Institution, or do not maintain their shares with a Depositary, may file only one Preemption Right Exercise Reservation Form with any branch of the Bank, the deposit intended investment amount being unnecessary.

e) Assignment of preemptive right: The Preemption Right may be traded privately or assigned by the Shareholders pursuant to §6 of Article 171 of the Brazilian Corporate Law, except as prohibited by restrictions imposed by laws or regulations of Brazil or any other relevant jurisdiction. U.S. Holders may only transfer their respective Preemption Rights in accordance with Regulation S of the Securities Act of 1933, as amended, within the time period established for exercising such Preemption Right, through a specific Assignment Agreement (“ Assignment Agreement ”), attached to the Prospectus for the Offering (“ Prospectus ”). Before June 23, 2010, Shareholders acquiring Preemption Rights must deposit with the Bank, at any branch indicated in the Notice to the Market in relation to the Offering published on June 14, 2010, a copy of the respective Assignment Agreement duly signed by the parties and notarized and, in the event of corporate entities, attaching copies of documents establishing the power of representation of the signatories. There will be no trading of subscription rights on the BM&FBOVESPA.

f) Price per share: The price per share will be established after the placement of the reservation forms through a bookbuilding process. Bookbuilding consists of determining the sales price of the Common Shares by considering the stated investment intentions of Institutional Investors, i.e. , how much each would be willing to pay per Common Share. Shareholders who exercise their preemptive rights and non-institutional investors do not participate in the bookbuilding process.

g) Maximum price indicated by the shareholder: Any Shareholder may establish in the Preemption Right Exercise Reservation Form, a cap price per Common Share as a condition to the effectiveness of the Shareholder’s reservation. If the Shareholder chooses to set a cap price per Common Share in its Preemption Right Exercise Reservation Form and the price per Common Share established exceeds such cap price, the reservation form will automatically be canceled by the Bank. Once signed by the Shareholder, the Preemption Right Exercise Reservation Form will be considered irreversible and irrevocable, the Shareholder not being allowed to modify the cap price included therein.

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h) Notice to ADR holders: Any holders of ADRs who wish to participate may contact Paul Brophy at The Bank of New York Mellon at (212) 815-2301 for further information.

Attached hereto as Annex A is a limited translation of relevant information from the Formulário de Referência of the Bank, dated June 14, 2010, and the preliminary prospectus for a primary and secondary offering of common shares by the Bank, dated June 14, 2010, providing certain information regarding preemptive rights being offered to current shareholders of the Bank, the Bank itself and the Bank’s common shares. More information may be obtained by visiting the Bank’s website at www.bb.com.br .

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Annex A

LIMITED TRANSLATION OF REFERENCE FORM AND PROSPECTUS

CONTENTS

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In this limited translation of relevant information from the Formulário de Referência (the “reference form limited translation”) of Banco do Brasil S.A. (the “Bank”), dated June 14, 2010, and the preliminary prospectus for a primary and secondary offering of common shares by the Bank, dated June 14, 2010, providing certain information regarding preemptive rights being offered to current shareholders of the Bank, the Bank itself and the Bank’s common shares, references to:

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FORWARD-LOOKING STATEMENTS

This reference form limited translation contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements appear in a number of places in this reference form limited translation, principally in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Such estimates and forward-looking statements are primarily based on current expectations and projections about future events and financial trends that affect, or may affect, the Bank’s business, financial condition, results of operations and prospects. In addition to the items discussed in other sections of this reference form limited translation, there are many significant risks, uncertainties and assumptions that might cause the Bank’s business, financial condition, results of operations, liquidity and prospects to differ materially from those set out in its estimates and forward-looking statements, including matters such as, and include statements regarding the intent, belief or current expectations of the Bank or those of its officers with respect to, among other things, the Bank’s financing plans, trends affecting the Bank’s financial condition or results of operations, the impact of competition and future plans and strategies. These statements reflect the Bank’s views with respect to such matters and are subject to risks, uncertainties and assumptions, including, among other things:

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The words “believe,” “could,” “may,” “estimate,” “continue,” “potential,” “anticipate,” “intend,” “expect,” “will,” “should” and “plan,” among others, are intended to identify forward-looking statements. Forward-looking statements speak only as of the date they were made and the Bank does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this reference form limited translation might not occur. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. As a result, prospective investors should not make an investment decision solely based on the forward-looking statements contained in this reference form limited translation.

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PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION

The Bank and its subsidiaries’ (BB-Consolidated) audited consolidated financial statements as of and for the years ended (i) December 31, 2009 and 2008, or the 2009 Financial Statements; (ii) December 31, 2008 and 2007, or the 2008 Financial Statements, and, together with the 2009 Financial Statements, the Annual Financial Statements; and (iii) the Bank’s unaudited consolidated interim financial information as of and for the three month periods ended March 31, 2010 and 2009, or the March 2010 Financial Statements, and together with the Annual Financial Statements, the Financial Statements, in each case together with the notes thereto and included elsewhere in this reference form limited translation, have been prepared in accordance with accounting practices adopted in Brazil, based on Brazilian Law No. 6,404, dated December 15, 1976, as amended, or the Brazilian Corporations Law, the accounting standards issued by the Brazil Institute of Independent Accountants (Instituto dos Auditores Independentes do Brasil) (“IBRACON”), the Accounting Pronouncement Committee (Comitê de Pronunciamentos Contábeis) (“CPC”), and the rules and regulations issued by CVM and the Central Bank. The accounting practices adopted in Brazil are defined, for the purposes of this reference form limited translation, as “Brazilian GAAP,” which differs in significant respects from generally accepted accounting principles in the United States, or U.S. GAAP.

As mentioned in the notes to the Bank’s consolidated financial statements, accounting practices adopted in Brazil were modified on January 1, 2008. The consolidated financial statements as of and for the year ended December 31, 2007 were prepared in accordance with accounting practices adopted in Brazil enacted as of December 31, 2007 and, as permitted by the Technical Standard CPC 13— First-time Adoption of Law No. 11,638/07 and MP 449/08 (converted into Law No. 11,941, dated May 27, 2009), have not been restated to reflect the adjustments required to allow comparison with the consolidated financial statements of 2009 and 2008. Therefore, the 2007 financial information presented in this reference form limited translation is not directly comparable to that of 2009 and 2008.

The audit report covering the Bank’s 2009 Financial Statements contains an emphasis paragraph stating that the Bank has recorded assets relating to the surplus of PREVI, which was determined based on criteria established by management that include estimates and assumptions of an actuarial and financial nature, as well as the fulfillment of the regulatory requirements in force. In addition, the audit report states that the balances and respective income of certain indirect investments and the net assets used in the calculation of the Retirement and Pension Plan were audited by other independent accountants and that the Bank’s independent auditor’s evaluation with respect to those assets and income is based on the reports issued by the other independent accountants.

The audit report covering the Bank’s 2008 Financial Statements states that the balances and respective income of some indirect subsidiaries and foreign branches and the net assets of the Retirement and Pension Plan were audited by other independent accountants and that the Bank’s independent auditor’s evaluation with respect to those assets and income is based on the reports issued by the other independent accountants. In addition, the audit report contains paragraphs emphasizing that (a) the financial statements for the year ended December 31, 2007 were prepared in accordance with the accounting practices adopted and effective in Brazil up to December 31, 2007 and, as permitted by Technical Pronouncement CPC 13—the Initial Adoption of Law 11,638/07 and of Medida Provisória 449/08, they are not presented with the reclassifications necessary for comparability between the years reported; (b) the Bank has recorded assets relating to its surplus in the Retirement and Pension Plan that were recorded based on criteria established by the Bank’s management that include estimates and assumptions of an actuarial and financial nature; and (c) amounts were recorded relating to income and social contribution tax credits that are contingent on future generation of taxable income and adherence to rules established by the National Monetary Council of Brazil or National Monetary Council or CMN.

The report covering the Bank’s March 2010 Financial Statements contains an emphasis paragraph stating that during 2009, the Brazilian Securities Commission ( Comissão de Valores Mobiliarios or “CVM”)

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approved several accounting pronouncements and interpretations and other guidance issued by the CPC and effective in 2010, with retroactive application to 2009 for comparative purposes, which alter the accounting practices adopted in Brazil. As allowed by the CVM through Deliberation 603/09, the Bank’s management has presented its interim financial information as of and for the three-month periods ended March 31, 2010 and 2009 in accordance with accounting practices adopted in Brazil during fiscal year 2009, and has not applied the new accounting pronouncements, which must apply to the full fiscal 2010 year. The Bank will refile its interim financial information as of and for the three-month periods ended March 31, 2010 and 2009 in accordance with the new accounting rules, when its financial statements for the year ended December 31, 2010 are issued, which may affect significantly the way the Bank reports its results, cash flows and equity and financial condition.

Moreover, the Brazilian Accounting Pronouncements Committee (CPC) issued a number of accounting pronouncements which, if approved by the Central Bank, must be adopted in the preparation of the Bank’s financial statements in accordance with the accounting practices adopted in Brazil for the year ended December 31, 2010. The Bank’s management understands that the application of the accounting pronouncements will not have a relevant impacts on the stockholders’ equity and results of the Bank. According to the CVM, the presentation of the financial statements for the period ended December 31, 2009 is mandatory for comparison purposes and the quarterly information prepared in accordance with the accounting practices adopted in Brazil for the quarters ended in 2010 and for comparison purposes in 2009 must also be presented again upon the preparation of the annual financial statements for the year ended 2010, in order to reflect the adoption of such pronouncements.

The Bank is analyzing if the rules issued by CVM, regarding the presentation of financial statements, are also applicable to financial institutions, as the application of such accountancy pronouncements depends on the approval by the Central Bank.

The Bank must also prepare, as from the year ended December 31, 2010, its financial statements prepared in accordance with the International Financial Reporting Standards (IFRS). IFRS differs, in certain material respects, from the accounting practices adopted in Brazil. The Bank has identified but not quantified such differences and has not prepared any reconciliation between the IFRS and the accounting practices adopted in Brazil for any of the financial statements in connection with this reference form limited translation or for any other purpose. The Bank’s management understands, however, that such reconciliation would not identify the material differences among the balances the Bank reports, provided that the Bank’s financial statements prepared in accordance with the accounting practices adopted in Brazil could be different had these financial statements been prepared in accordance with the IFRS.

The assets and liabilities of Banco Votorantim, in proportion to the Bank’s share in total capital stock, have been consolidated into the Bank’s balance sheet as of December 31, 2009. The proportional share of income and expenses of Banco Votorantim was consolidated into the Bank’s financial statements as from October 2009.

In addition, as a result of the implementation of the new accounting policies in response to Law No. 11,638, the Bank’s consolidated financial statements as of and for the years ended December 31, 2009 and 2008 are not directly comparable to those as of and for the year ended December 31, 2007.

In this reference form limited translation, tables containing financial information include, except where otherwise indicated, consolidated financial information of the Bank.

The Bank’s average volume and balance data has been calculated based upon the average of the month-end balances during the relevant period.

Certain rounding adjustments have been made in calculating some of the figures included in this reference form limited translation. Accordingly, numerical figures shown as totals in some tables may not agree precisely with the figures that precede them. The Bank maintains its books and records in reais .

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The statistical information and data related to the Bank’s business areas were obtained from government entities or extracted from general publications. The Bank has not independently verified such information and data, and, therefore, cannot assure their accuracy and completeness.

Solely for the convenience of the reader, the Bank has converted certain amounts contained in “Capitalization,” “Selected Financial Information,” “Other Statistical and Financial Information” and elsewhere in this reference form limited translation from reais into U.S. dollars. Except as otherwise expressly indicated, the rate used to convert such amounts was R$1.781 to US$1.00 (subject to rounding adjustments), which was the exchange rate in effect as of March 31, 2010 as reported by the Central Bank. The U.S. dollar equivalent information presented in this reference form limited translation is provided solely for the convenience of investors and should not be construed as implying that the amounts presented in reais represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. The real /U.S. dollar exchange rate may fluctuate widely, and the exchange rate as of March 31, 2010 may not be indicative of future exchange rates. See “Exchange Rate Information” for information regarding real /U.S. dollar exchange rates.

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RISK FACTORS

An investment in the Bank’s common shares involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this reference form limited translation before making an investment decision regarding the Bank’s common shares. The Bank’s business, financial condition, results of operations, liquidity, and/or prospects may be adversely affected by any of these risks, among others. The trading value of the Bank’s common shares could decline due to the occurrence of any of these risks or other factors, and you may lose all or part of your investment. Additional risks and uncertainties of which the Bank is currently not aware may also materially and adversely affect the Bank’s business, financial condition, results of operations, liquidity, prospects and/or the trading value of the Bank’s common shares.

For purposes of this section, unless otherwise expressed or if required by the context, an indication that a risk, uncertainty or problem could or will have an “adverse effect on the Bank” or “will adversely affect the Bank” means that the risk, uncertainty or problem could or will have an adverse effect on the Bank’s business, financial condition, results of operations, liquidity, prospects and/or the trading value of the Bank’s common shares. Similar expressions in this section should be read as having the same meaning.

Risks Relating to the Bank and the Brazilian Banking Industry

Brazilian banks, including the Bank, are subject to extensive and continuously evolving regulatory review by the Central Bank.

The Brazilian government has exercised and continues to exercise significant influence over the Brazilian economy. The regulatory structure governing Brazilian financial institutions is continuously evolving due to, among other reasons, international treaties and agreements. Existing laws and regulations could be amended, the manner in which laws and regulations are enforced or interpreted could change and new laws or regulations could be adopted.

The Bank has no control over government regulations applicable to its activities, including those relating to:

Any such changes could adversely affect the Bank’s operations and financial results.

The Bank may be required to recognize liabilities related to government programs and funds in excess of those recorded.

The Bank acts as an agent for the onlending of funds from government programs and funds—principally from the Midwest Constitutional Financing Fund ( Fundo Constitucional de Financiamento do Centro-Oeste or

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FCO), Worker Support Fund ( Fundo de Amparo ao Trabalhador or FAT) and from the Treasury National ( Orçamento das Operações Oficiais de Crédito do Tesouro Nacional )—to provide financing at lower interest rates to certain business sectors, especially the agribusiness sector. The principal projects financed are the Federal Employment and Income Generation Program ( Programa de Geração de Emprego e Renda or “PROGER”) and the Brazilian Family Agriculture Program ( Programa Nacional de Agricultura Familiar or “PRONAF”).

The Bank usually recognizes liabilities related to onlending of funds, which are subject to account reconciliation and rendering of accounts to funding sources and regulatory agencies. The implementation of a new system to control these onlendings, to review methodologies and to interface with other corporate accounting and operating systems will allow the Bank to identify differences in the reconciliation of liabilities, which may adversely affect the Bank’s financial results.

The future profitability of the Bank is subject to certain factors outside the control of the Bank, including prevailing interest and exchange rates and the market price of its securities portfolio.

The Bank’s results of operations are subject to factors that are beyond its control, including interest and exchange rates in force and the market price of its securities portfolio. Accordingly, its ability to secure satisfactory rates of return on its assets and stockholders’ equity may depend on its ability to increase its revenue, reduce costs and adjust its portfolio of assets in order to minimize adverse impacts from the fluctuation of macroeconomic indicators.

As of March 31, 2010, 53.9% of the Bank’s balance sheet consisted of credit, leasing and securities transactions (including Federal Government securities), the return on which is subject to fluctuations in exchange and interest rates and other macroeconomic factors. The Bank’s securities portfolio was comprised of (i) 81.2% of securities linked to an inter-bank certificate of deposit ( Certificado de Depósito Interbancário or “CDI”) or to the Taxa Média SELIC (“TMS”) rate, (ii) 16.8% of securities with a fixed rate of interest, and (iii) 2.0% of securities linked to other indexes, making the majority of the portfolio securities with a floating rate of interest. The Bank has investments abroad, as well as external funding, mainly in U.S. Dollars, that may adversely impact its profitability in the event of a significant foreign exchange variation of the real against the U.S. Dollar.

As of March 31, 2010, the Bank’s net exchange position was short in foreign currency in the amount of R$2.8 billion. The Bank’s overall exchange exposure, calculated in accordance with Central Bank Circular No. 3,389, was positive in the amount of R$767.7 million.

The Bank is subject to all risks associated to long-term credit operations, whether related to the economic activity, interest rate levels, mismatch of funding periods or changes in the Central Bank’s requirements. As of March 31, 2010, the Bank had a mismatch in the transactions involving securities with a fixed rate of interest, with average maturity of assets and liabilities of nine months and six months, respectively. In the event of changes in interest rates, any public securities having a fixed rate of interest will lead to a material adverse financial impact, whether on results for securities classified as “trading securities” or on stockholders’ equity for securities classified as “available for sale.” None of these factors is under the Bank’s control, and may adversely affect the Bank.

As the controlling shareholder of the Bank, the Federal Government may adopt policies that could have a material adverse effect on the Bank.

The Federal Government, through the National Treasury, is the Bank’s controlling shareholder and, as a result, the President of Brazil directly appoints the Bank’s President, as well as the President of the Central Bank and the Finance Minister. The Federal Government also appoints the majority of the members of the Bank’s Board of Directors. See “Management—Board of Directors.”

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The Bank’s by-laws currently provide that, with respect to the relationship between the Bank and its controlling shareholder, the Federal Government, the Bank is required to: (i) perform certain duties and services in its role as the financial agent of the National Treasury and certain other functions assigned to it by law; (ii) extend financing in respect of governmental interests and execute certain official programs through the Federal Government Treasury funds or funds of any other nature; and (iii) render guarantees in favor of the Federal Government.

Any such actions required to be taken by the Bank are contingent upon certain safeguards, including the placing of funds at the Bank’s disposal of which a pre-determined amount is set aside for the reimbursement of financial charges and compensation for the Bank’s service, which amount may never be lower than the cost of services to the Bank.

The Federal Government, as the Bank’s majority shareholder, without the consent of the remaining shareholders, will be entitled, directly or indirectly, to:

The Federal Government may cause the Bank to adopt certain measures or enter into transactions intended to promote political, economic or social purposes rather than to exclusively develop business and increase the Bank’s results of operations. If any such measures are adopted, they may be contrary to the interests of the Bank and those of the Bank’s remaining shareholders, and may have adverse effects on the business, operations, profitability or capital adequacy of the Bank. See “—Risks Relating to Brazil—The Bank is subject to influence by the Federal Government, and any change to the Bank’s strategy and policies that the administration makes could adversely affect its operations or prospects” for a discussion of the potential effects on the Bank of political changes in Brazil.

The Bank has expanded its consumer lending business which may increase the risk of the Bank’s loan portfolio.

The Bank has expanded its consumer lending business. Consumer lending tends to be more risky than corporate or mortgage lending because consumer lending is generally either unsecured or collateralized by cumbersome assets. The Bank’s increase in consumer lending has therefore increased the overall risk of the Bank’s credit portfolio, which may subject the Bank to loan defaults that could have an adverse effect on its results of operations. In addition, many consumer finance products are relatively new in Brazil and therefore may be potentially more vulnerable to market volatility. The strategy of expanding consumer financing will likely be maintained over the coming years, and consumer financing could increase by between 27% and 32%, which may increase the risk of the Bank’s loan portfolio.

The Bank may face risks related to mergers and/or acquisitions.

The Bank has recently acquired several other banks and may merge or acquire other banks and, consequently, may be subject to risks related to such transactions. For example, the Bank may (i) overpay for these acquisitions, especially considering that the target companies may not achieve the forecasted results and, therefore, the investments may not deliver the expected returns; (ii) encounter problems when integrating products, systems, technology, staff and facilities, which can adversely affect the Bank’s internal controls,

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procedures and policies; (iii) fail to achieve expected operational and financial synergies with any such merger or acquisition, which may result in adverse effects on the Bank’s business, operational results and cash flow; (iv) not fully assess potential contingencies of the target companies; and (v) as successor to the target company’s business, be held liable for the target company’s liabilities, including those generated prior to the transaction, as well as be exposed to risks related to the acts of the previous management team of the target company and potential liabilities for acts that occurred prior to the transaction.

The integration of Nossa Caixa, which is expected to be completed by July 2010, has been challenging, as Nossa Caixa’s operations and distribution network are as large as the Bank’s in the State of São Paulo. In addition, this acquisition is still subject to approval by the Brazilian Antitrust Agency ( Conselho Administrativo de Defesa Econômica , or CADE). Although the strategy for the acquisition is for Nossa Caixa to migrate to the Bank’s systems and credit analysis and other procedures, if the integration is not successful, if Nossa Caixa presents unforeseen liabilities or losses, or if the integration is not able to be completed in a timely manner or within the budget allocated, it could adversely affect the Bank’s results of operations.

Pursuant to the specific terms of each transaction, the Bank may also be required to submit for approval any merger and acquisition transactions to the Brazilian anti-trust authorities ( Conselho Administrativo de Defesa Econômica ), the Central Bank and/or applicable regulatory agencies. The Bank may not be successful in obtaining the necessary authorizations or may not obtain such authorizations in an expected manner.

In the past months, the Bank has issued notices of material events relating to its intention to acquire or enter into strategic partnerships with other companies. If completed, these transactions may increase the risks described above relating to merger and/or acquisitions events.

The Bank’s acquisitions may involve business segments in which the Bank does not have primary experience or target banks with policies different from the Bank’s policies.

The Bank has recently and may in the future acquire other banks that operate in business segments or countries in which the Bank has not historically focused. If the Bank is unable to successfully operate in these business segments or countries, the Bank’s results of operations could be adversely affected. For further information, see “Business—Recent Relevant Acquisitions and Partnerships.”

Minimum capital adequacy requirements imposed on the Bank following the implementation of the Basel II Accord may negatively impact the Bank’s results of operations and financial condition.

In June 2004, the Basel Committee on Banking Regulations and Supervisory Practices approved a new framework for risk-based capital adequacy, commonly referred to as the “Basel II Accord.” The Basel II Accord sets out the details for adopting more risk-sensitive minimum capital requirements for financial institutions. As part of its implementation, the Central Bank has proposed new capital adequacy regulations, which among other provisions contain changes to the risk weighting for different categories of loans.

According to Communication No. 19,028 of the Central Bank, the requirements for use of certain capital calculation models included in the Basel II Accord are to be implemented by the first half of 2013, with emphasis on changes in the allocation of capital for credit risk and the allocation of capital to operating risk. Furthermore, Central Bank Circular No. 3,478 of December 24, 2009 established that financial institutions planning to implement internal models for market risks will be required to request prior authorization from the Central Bank as from June 30, 2010.

In addition, pursuant to Resolution No. 3,490 of August 29, 2007 of the National Monetary Council ( Conselho Monetário Nacional , or “CMN”), and Central Bank Circular No. 3,383 of April 30, 2008 the Central Bank requires banks to set aside a portion of their equity to cover operational risks (i.e., losses arising from

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failures, deficiency or inadequacy of internal proceeding, personnel or systems, including due to external events). Resolution No. 3,490 became effective as of July 1, 2008 and required a portion of banks’ equity to cover operational risks. The risk-weighted capital ratio required of the Bank and all other banks in Brazil is currently 11.0% of risk-based exposure. The Bank’s Basel ratio was 13.7% as of December 31, 2009, compared to 15.2% as of December 31, 2008. As of March 31, 2010, the ratio remained unchanged at 13.7%.

Due to changes in the rules concerning capital adequacy or due to changes in the performance of the Brazilian economy as a whole, the Bank may be unable to meet the minimum capital adequacy requirements required by the Central Bank. The Bank may also be compelled to limit the Bank’s credit operations, dispose of some of its assets and/or take other measures that may adversely affect the Bank’s results of operations and financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Financial Condition and Results of Operations—Capital Adequacy” and “Regulation of The Brazilian Banking Industry—Regulatory Capital and Stockholders’ Equity Standards.”

The continued expansion of the Bank’s business by means of acquisitions may cause the Bank’s risk-weighted capital ratio to decrease, increasing the Bank’s risk profile.

Following the Bank’s investment in Banco Votorantim, as of December 31, 2009, the Bank’s risk-weighted capital ratio was 13.7%. In addition, as the Bank’s business continues to expand by means of acquisitions, its risk-weighted capital ratio may continue to decrease without the Bank raising additional regulatory capital. Any such decrease in the ratio increases the Bank’s risk profile, which represents an increased risk that the Bank will not be able to meet Brazilian capital adequacy requirements or fulfill its obligations.

The Bank may be required to resume contributions to PREVI, which may adversely affect its results of operations.

The Bank sponsors PREVI, which provides benefits to its participants and their dependants in addition to those provided by the Brazilian social security system.

PREVI offers two distinct plans: (i) the defined contribution plan (“ Plano Previ Futuro ”), and (ii) the defined benefit plan (“ Plano de Benefícios No. 1”). The Bank’s contributions to Plano Previ Futuro totaled R$38.7 million as of March 31, 2010, R$144.1 million in 2009, R$118.3 million in 2008 and R$90.5 million in 2007. However, in view of the accumulated surplus for Plano de Benefícios No. 1, as of December 31, 2006, contributions by participants, beneficiaries (retirees and pensioners) and the Bank (as plan sponsor) were suspended in January 2007. This suspension will be reassessed every 12 months, and will be maintained for as long as Plano de Benefícios No. 1 has a surplus. For 2008 and 2009, the Bank reassessed this suspension and maintained it in accordance with the surplus that remained at the time of those reassessments.

Due to a number of factors, PREVI may not be able to maintain the accumulated surplus of Plano de Benefícios No. 1 and, on that basis, the Bank may have to resume contributions to this plan, which may adversely affect its results of operations.

As of March 31, 2010, the Bank had an accumulated surplus of R$13,374 million in the PREVI, the Retirement and Pension Plan, compared to an accumulated surplus of R$7,794 million as of March 31, 2009. The Bank calculates accumulated surplus based on management criteria that include estimates and assumptions of a long-term actuarial and financial nature, as well as application and interpretation of regulatory rules in force as of the calculation date. Accordingly, any inaccuracy in estimates and assumptions could result in discrepancies between the amount recorded and the amount actually realized, resulting in a negative impact on the Bank’s results of operations.

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The Bank is responsible for social security charges not established in PREVI’s benefit plans and the Bank’s provisions may not be sufficient to cover its potential liabilities.

The Bank is responsible for social security charges for employees hired up to April 14, 1967, who are not provided for in PREVI’s benefit plans. These charges have defined-benefit characteristics and the system adopted for actuarial revaluations is the capitalization method. The Bank is also responsible for charges arising from legal decisions that increase retirement and pension benefits amounts beyond those already provided for under PREVI’s benefit plans.

In compliance with Deliberation No. 371 of December 13, 2000 of the CVM, the Bank recorded R$1,642 million in provisions arising from this actuarial liability on its balance sheet as of March 31, 2010. However, the Bank cannot estimate if this accrued amount (or any other amount that may be accrued in the future) will be sufficient to cover potential liabilities in the event of changes in the actuarial assumptions underlying the calculation of this obligation or in the event the Bank is required to increase retirement and pension benefits amounts beyond the amounts set forth in PREVI’s benefit plans. Accordingly, a significant increase in the Bank’s actual liability in excess of the amount of its provisions may adversely affect the Bank’s financial results.

The Bank’s ability to charge payments due from payroll deduction loan transactions depends on the effectiveness and validity of agreements entered into with, and the credit risk of, private employers and public sector entities, as well as on borrowers keeping their jobs.

The Bank has been entering into an increased number of payroll deduction loan transactions. To the extent that this expansion continues, part of the Bank’s revenues will result from payments due from payroll deduction loan transactions, which will be directly deducted from employees’ or retirees’ paychecks. These deductions could be suspended if the agreements entered into with borrowers’ employers or public sector entities are terminated, or if an employee of both private or public sector entities has his or her employment contract terminated by the employer, or otherwise ceases employment.

In the case of termination of these agreements, the Bank’s collection system of payroll deduction loans will be compromised and a new collection system may be necessary, which may not be as effective as the current one, or may have high operating costs. In this case, transactions related to the terminated agreements may decrease. If an employee has his or her employment contract terminated by the employer, leaves the job, or dies, the payment of the payroll deduction loan may depend exclusively on the financial ability of the borrower or his/her successors to repay the loan. Similarly, if private employers suffer losses or any type of bankruptcy or liquidation event, they may not be able to pay their employees. The Bank cannot assure that it will recover its credit under these circumstances.

These events could increase the risk in the Bank’s consumer loan portfolio and could result in a higher percentage of losses in transactions of this nature, which could adversely affect the Bank’s results of operations. These risks could also result in an increase in administrative expenses and other expenses related to collection of payments due, including the implementation of a new collection system, which may adversely affect the Bank’s operations and financial position.

Collateral with respect to defaulted loans may be difficult to repossess and for the Bank to realize value from.

Upon defaults by the Bank’s clients and after all extrajudicial collection measures have been exhausted, collateral with respect to the underlying loans may be difficult for the Bank to repossess and to realize value from, in view of all the steps necessary in judicial proceedings for debt collection or low liquidity of specific markets.

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The Bank’s growing extension of payroll deduction loans is subject to changes in laws and regulations, interpretation by the courts and the policies of public entities.

Since the repayment of payroll deduction loans (which the Bank has been increasingly extending, following the Nossa Caixa acquisition), is directly deducted from the payroll of public servants or the National Social Security Institute (the Instituto Nacional do Seguro Social or “INSS”) retiree or pensioner benefit, the Bank is, to a great extent, exposed to the credit risk of the entity to which borrowers are related, which enables the Bank to extend loans at rates lower than those charged in connection with other products offered by financial institutions in Brazil, including the Bank itself. This payment deduction mechanism is regulated by a number of laws and regulations, at the federal, state and municipal levels, which establish deduction limits and provide for the irrevocability of the authorization given by a public servant or INSS beneficiary to deduct the amount for purposes of settlement of the loan.

Accordingly, the enactment of a new law or regulation or the amendment to, revocation or new interpretation of existing laws and regulations which prohibits, restricts or may adversely affect the ability of the Bank to carry out, these direct deductions may increase the risk profile of its credit portfolio by increasing the interest rate of its personal loans and resulting in a greater amount of loan losses.

In June 2004, the Brazilian Superior Court of Justice ( Superior Tribunal de Justiça ) determined that an authorization for direct payroll deduction given by a public servant in the State of Rio Grande do Sul could be revoked, and that an irrevocable authorization would be abusive and, accordingly, null and void. Even though in June 2005 the Brazilian Superior Court of Justice issued a new decision recognizing that the irrevocability of these authorizations is legal and valid, the Bank can make no assurance that such decision will be corroborated by other courts.

Additionally, the extension of payroll deduction loans to public servants and INSS retirees and pensioners depends on the authorization by public entities to which these persons are related. The Federal Government or other governmental entities may change the regulations governing these authorizations and other government agencies may impose future regulations that restrict or prevent the Bank from offering payroll deduction loans to their employees. Part of the Bank’s credit portfolio is composed of payroll deduction loans granted to public servants and INSS retirees and pensioners, and amendments to or the enactment of new laws or regulation that restrict or prevent the Bank from extending this type of loan may adversely affect the Bank.

On September 29, 2005, the INSS issued a regulatory instruction prohibiting retirees and pensioners from authorizing, by telephone calls, any payroll deduction loans deduction from their benefits and limiting the repayment of these operations to 36 monthly installments. Additionally, on November 22, 2005, the INSS suspended, for a 30-day period, any renewal of deduction authorization for payment of loans extended by means of credit card or the extension of this type of loan to INSS retirees or pensioners. The suspension was in compliance with a recommendation by the National Social Security Council, or Conselho Nacional da Seguridade Social , that decided to extend this suspension up to June 15, 2006. On July 7, 2006, INSS issued Regulatory Instruction No. 8, authorizing the extension of payroll deduction loans upon the use of credit cards, limited to twice the amount of the benefit received by the retiree or pensioner. Pursuant to this Regulatory Instruction, the Bank resumed the development of the payroll deduction loans line involving credit cards. Additionally, on May 16, 2008, INSS issued Regulatory Instruction No. 28 (amended by Regulatory Instruction No. 39 of June 18, 2009 and by Regulatory Instruction No. 43 of January 19, 2010) establishing new procedures for the extension of payroll deduction loans to INSS retirees and pensioners. Such new procedures included the prohibition on the use of payroll deduction credit cards for cash withdrawals and the granting of grace period for the payment of the first installment of the loan. The Bank can make no assurance that INSS will not again change the regulation, which may adversely affect the Bank.

Additionally, the Bank has entered into exclusive agreements with public entities to extend payroll deduction loans to public servants. In return, the Bank pays public entities an agreed upon business development

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fee. There has been an increase in the number of legal proceedings challenging the Bank’s exclusive payroll deduction loan arrangements with certain government entities, including the State of São Paulo, in recent months. If a new Court decision challenges and revokes this right to exclusivity, the Bank’s results of operations may be adversely affected.

Monetary regulations imposed by the Federal Government could adversely affect the Bank.

To support its monetary policy, the Federal Government, acting through the CMN and the Central Bank, periodically introduces regulations aimed at controlling the rate of inflation through, among other means, the adjustment of reserve requirements applicable to loans and deposits, the regulation of the maximum term of outstanding credits, and the imposition of limitations on amounts that may be financed. Controls such as these are used by the Federal Government on a regular basis to regulate the availability of credit and to reduce or increase consumption. At times, these regulations have affected the ability of the Bank’s clients to obtain credit and restricted the growth of the Bank’s loan portfolio. Some of these controls have remained in place and have had a continuing effect on the Bank’s business. There can be no assurance that the Federal Government will not implement regulations that will affect the Bank’s liquidity, the creditworthiness of the Bank’s clients, its funding strategy, its lending growth or its profitability.

Rural lending may be increased by the Bank due to the Federal Government’s policy, which may adversely affect the Bank’s profitability.

The Bank’s agribusiness credit portfolio, which currently accounts for approximately 21.2% of its total credit portfolio, has historically been less profitable due to lower spreads when compared to the Bank’s consumer credit portfolio. During the first quarter of 2010, while the consumer credit portfolio earned an annual average spread of 9.8%, the average annual spread on the Bank’s agribusiness credit portfolio was 5.6%. The spread of 18.2% on the consumer credit portfolio and the spread of 6.7% on the corporate credit portfolio have also contributed to the annual average spread of the credit portfolio. Additionally, the performance of the Bank’s agribusiness credit portfolio is subject to factors that are beyond the Bank’s control, such as the price of agricultural commodities, weather conditions, crop failures and the Federal Government’s policy relative to agricultural credit and agribusiness. As an institution controlled by the Federal Government, and as the main agribusiness financier in Brazil, the Bank may be required to increase the size of its agricultural credit portfolio and implement government agribusiness programs in order to meet political guidelines and governmental goals. See “Business—Description of Products and Services—Agribusiness Loans,” for a discussion of the Bank’s rural lending business.

The increasingly competitive environment and recent consolidation in the Brazilian banking industry may adversely affect the Bank.

The market for financial and banking services in Brazil is highly competitive. The Bank faces significant competition from other large Brazilian and international banks. For example, several of the Bank’s competitors took early steps to expand their consumer credit portfolios, and have merged and formed joint ventures with retailers and other partners in furtherance of this strategy. In addition, several of the Bank’s competitors have expanded the scope of their international activities.

The Brazilian banking industry experienced a period of consolidation in the 1990s, when a number of Brazilian banks were liquidated and several important state-owned and private banks were sold. Competition increased during this period as foreign banks entered the Brazilian market through the acquisition of Brazilian financial institutions. The privatization of state-owned banks also made the Brazilian banking and financial services markets more competitive. Although Brazilian regulations present some limited barriers to market entry, the presence of foreign banks in Brazil, some of which have greater resources than the Bank, has grown and competition has increased in the banking sector generally as well as in markets for specific products.

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In September 2006, the CMN enacted new regulations to increase competition among Brazilian commercial banks. As a result of these new regulations: (a) banks are prohibited from charging clients fees for services in connection with salary, pension and other income payment accounts that such clients are required to maintain with a bank that has been designated by such client’s employer, pension fund or income payor, (b) financial institutions and leasing companies must accept the prepayment of loans and leasing transactions by clients who have elected to refinance such debt with other financial institutions, (c) clients will have the right to request that a financial institution disclose their credit history to another financial institution, and (d) changes in the regulation of the Credit Guarantee Fund ( Fundo Garantidor de Crédito or “FGC”), which is a government fund created to guarantee payment of funds deposited with financial institutions in case of intervention, administrative liquidation, bankruptcy or other state of insolvency, thereby providing depositors with greater assurance that their deposits will be safeguarded.

By creating mechanisms that will make it easier for clients to open new accounts and transfer their funds from one institution to another, these new regulations aim to increase competition among financial institutions by facilitating a client’s ability to switch their business between financial institutions. In addition, the changes in the federal depositary insurance regime are intended to provide clients with the security of knowing that deposits, including those with smaller financial institutions will be guaranteed at up to R$60,000 per client in the event that such financial institution becomes insolvent. Additionally, recent acquisitions of small- and mid-sized Brazilian banks, in particular those specializing in the retail segment, by large retail banks, have increased competition in the sector.

This increased competition may adversely affect the Bank by, among other things, limiting its ability to increase its client base and expand its operations, reducing asset growth rate and profit margins on services it provides and increasing competition for investment opportunities. The Bank’s ability to compete satisfactorily will largely depend upon the successful implementation of its strategy. See “Business—Principal Strategies.”

Exposure to Federal Government debt could have an adverse effect on the Bank.

The Bank invests in debt securities issued by the Federal Government that are high liquidity instruments. As of March 31, 2010, 13.4% of the Bank’s total assets consisted of securities issued by the Federal Government. As of December 31, 2009, the consolidated net indebtedness of the Brazilian public sector, in accordance with the economic indexes published by the Central Bank totaled R$1,345.3 billion, or 42.8% of Brazil’s gross domestic product (“GDP”). If the Federal Government defaults on the timely payment of such securities, the Bank’s results of operations and financial condition may be adversely affected, as a result of such securities being marked to market. For a description of the Central Bank’s new valuation and accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Fair Value of Financial Instruments.”

Interest rate changes by the Central Bank could adversely affect the Bank’s results of operations and profitability.

The Central Bank periodically establishes the special overnight clearance and custodial rate ( Sistema Especial de Liquidação e Custódia or “SELIC rate”), which is the base interest rate for the Brazilian banking system and an important policy instrument for achieving Federal Government inflation targets, measured by the Brazilian Extended Consumer Price Index ( Índice de Preços ao Consumidor Amplo or “IPCA”), that were formally adopted on July 1, 1999. The Central Bank has frequently adjusted the base interest rate, increasing the rate numerous times in response to economic uncertainties and to achieve the goals of the Federal Government’s economic policies.

As of December 31, 2008, 2007 and 2006, the SELIC rate was 13.66%, 11.18% and 13.19%, respectively. In 2009, the Central Bank significantly reduced the SELIC rate, which was at a level of 8.75% as of December 31, 2009. On April 28, 2010, the Central Bank increased the SELIC rate to 9.50%. On June 9, 2010, the Central Bank increased the SELIC rate to 10.25%.

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Increases in the base interest rate could adversely affect the Bank’s results of operations, by reducing demand for its credit, increasing its cost of funds and increasing the risk of client default. Decreases in the base interest rate could also adversely affect the Bank’s results of operations, by decreasing the interest income the Bank earns on its assets linked to the SELIC rate and by lowering margins.

Changes in minimum levels for housing and agricultural sector loans may negatively affect the Bank’s profitability.

Pursuant to current Brazilian banking regulations, the Bank is required to allocate 70.0% of its savings deposits (as compared to 69.0% prior to October 31, 2008, 60.0% prior to June 30, 2007 and 55.0% prior to June 30, 2006) and 30.0% of its demand deposits to agricultural loans (compared to 25.0% prior to October 31, 2008). The currently applicable rates will be decreased by one percentage point annually until they reach 65% and 25%, respectively, starting on July 1, 2014.

The total amounts required to be applied to these loans can directly influence the profitability of the Bank’s business in view of two factors: (i) if the Bank does not achieve the minimum levels required for these loans, it must deposit the difference as compulsory deposits with the Central Bank, which generally do not yield returns as high as other investments; and (ii) loans to the agricultural sector have tended to entail more risk and to be less profitable than other lending opportunities available. The risks related to the agricultural sector refer to factors that are beyond the Bank’s control, such as weather conditions, price of agricultural commodities and cost of production. Changes to applicable law that increase the amount of agricultural loans the Bank must make may adversely affect its financial condition and results of operations. For further information, see “Regulation of the Brazilian Banking Industry.”

As of March 31, 2010, the Bank met all minimum levels required for housing sector loans. However, the Bank’s projections for its housing sector loan portfolio anticipate an increase in these loans, which would require further capital allocation. Risks related to housing sector loans include changes in the Bank’s ability to process these loans, changes in regulations applicable to the housing sector and macroeconomic risks related to the Brazilian economy, which could adversely affect the Bank’s financial situation and results of operations.

Changes in reserve requirements and compulsory deposits could adversely affect the Bank.

The Central Bank has periodically varied the amount of reserves that banks in Brazil (including the Bank) are required to maintain with the Central Bank in relation to amounts of demand deposits, savings deposits and time deposits and certain credit transactions, often to increase or decrease money supply for the purposes of managing the economy. Financial institutions (including the Bank) must comply with reserve requirements by depositing cash or, in some cases, Federal Government securities with the Central Bank. Some of the cash deposited with the Central Bank in satisfaction of reserve requirements does not earn interest, and even in those cases where the Central Bank pays interest, the rate is significantly less than that which the Bank would be able to earn through other investments. See “Regulation of the Brazilian Banking Industry—Regulatory Capital and Stockholders’ Equity Standards.” There is no assurance that the Central Bank will not further increase reserve requirements or impose new reserve or compulsory deposit requirements that could negatively affect the Bank’s liquidity, funding strategy, lending growth or profitability.

Any restrictions on bank loan interest rates may adversely affect the Bank by decreasing the Bank’s revenues and limiting its ability to make loans.

Decree No. 22,626 of April 7, 1933, also known as the Usury Law ( Lei de Usura ), prevents any person or entity from charging interest rates higher than twice the legal interest rate. However, the Banking Restructuring Law No. 4,595/64, together with various Court decisions, have exempted banks from this prohibition. Any changes to the courts’ views about this exemption or an amendment in the applicable laws and regulations limiting the interest rates that the Bank can charge on loans may reduce the amount of interest the Bank may charge on certain of its loans, which may adversely affect the Bank’s results of operations.

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The Bank might not be able to record all of its deferred tax credits.

Deferred tax credits are derived from either income and social contribution tax loss carry forwards or temporary differences, primarily related to long-term provisions for loan losses. The accounting treatment for deferred tax credits is governed by CMN Resolution No. 3,059 of December 12, 2002 as amended by CMN Resolution No. 3,355 of March 31, 2006 and CMN Resolution No. 3,655 of December 17, 2008.

In accordance with these Resolutions, financial institutions and other institutions authorized to operate by the Central Bank, including the Bank, may only account for deferred tax credits if they: (i) have a history of taxable profits or revenues for income and social contribution tax purposes, evidenced by the occurrence of such profits and revenues in at least three of the five last years, including the then current year; and (ii) expect, based on an internal probability study, to generate future taxable profits or revenues for income and social contribution tax purposes in subsequent periods, that will allow the realization of the deferred tax credits within ten years.

Under CMN Resolution No. 3,655, the total amount of deferred tax credits as a portion of the Tier 1 reference equity value cannot exceed (a) 30.0% after January 2009, (b) 20.0% after January 2010 and (c) 10.0% after January 2011; any amounts in excess of those limits must be deducted from the Bank’s Tier 1 reference equity value. The Bank has reported substantial taxable income and expects, based on an internal probability study, to generate taxable income in the future. Accordingly, the Bank accounts for all of its tax credits classified under assets. If the Bank is unable to maintain its taxable income in the future, it may be required to write-off its deferred tax credits and could be compelled by the Central Bank to reduce its assets and stockholders’ equity. Any such write-off or reduction could have a material adverse effect on the Bank’s financial condition and results of operations.

The Federal Government has announced that it plans to propose broad tax reforms that, if implemented, could adversely affect the Bank’s business.

The Federal Government regularly enacts reforms to tax and other assessment regimes affecting the Bank. These reforms include changes to the frequency of assessments and, occasionally, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental projects.

The Federal Government has announced that it plans to propose broad tax reforms in Brazil to improve the efficiency of allocation of economic resources. It is anticipated that the reform, if adopted, would involve a major restructuring of the Brazilian tax system, including the possible creation of a value-added tax on goods and services that would replace several taxes (including the social contribution tax, the federal tax on industrial products and the state tax on the circulation of goods and services). The effects of these changes, if enacted, and any other changes that could result from the enactment of additional tax reforms cannot be quantified, and the Bank cannot assure that these reforms will not have an adverse effect on the Bank’s business. Changes to the tax system in the past have produced uncertainty in the financial system and increased the cost of borrowing. These changes, if enacted, may contribute to a deterioration in the economic and financial condition of the Bank’s borrowers, and so may result in increases in the Bank’s non-performing loan portfolio in the future. Accordingly, these changes if enacted, may adversely affect the Bank’s operations and financial condition.

The ability to institute bankruptcy or liquidation proceedings against the Bank in Brazil may be limited by Brazilian law.

Law No. 6,024 of March 13, 1974 as amended (the “Financial Institutions Liquidation Law”) empowers the Central Bank to extra-judicially intervene in the operations or to liquidate financial institutions owned by the private sector or Brazilian state governments (but not of the Federal Government). The Bank, as an entity with majority ownership by the Federal Government, is therefore not subject to intervention or to extra-judicial liquidation by the Central Bank. Furthermore, according to Law No. 11,101 of February 9, 2005 (the “New

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Bankruptcy Law”), companies with government-owned and privately-owned stocks ( sociedades de economia mista ) such as the Bank, are not subject to bankruptcy proceedings. In this context, in the case of the Bank, only the Federal Government, as the controlling entity of the Bank, has the authority to intervene and liquidate the Bank.

Accordingly, the ability to institute bankruptcy or liquidation proceedings against the Bank in Brazil may not be permitted or may be limited by Brazilian law.

However, there can be no assurance that the New Bankruptcy Law, the Brazilian Corporations Law or the Financial Institutions Liquidation Law will not be amended in the future, either by means of an action by the Brazilian Congress or through a provisional measure by the President of Brazil, thus changing the Bank’s legal status. Should any such change occur, it may have an adverse effect on the Bank, including the Bank’s ability to meets its payment obligations.

The Bank’s results of operations may be affected by the Bank’s interest in subsidiary and associated companies in Brazil and abroad.

The Bank holds, directly or indirectly, equity interests in several financial and non-financial companies in Brazil and abroad. The equity in the earnings of these subsidiary and/or associated companies is included in the results of operations of the Bank. These investments represented 31.9% of the Bank’s results of operations during the first quarter of 2010.

The Bank’s results of operations may be adversely affected due to the different business activities developed by the Bank’s subsidiaries and associated companies. In addition, there can be no assurance that the Bank will receive any dividends or distributions from these subsidiaries or associated companies when they present negative financial results.

The Bank is subject to disruptions in some of its activities shifted to outside service providers, which may adversely affect the Bank’s business.

The Bank has a wide network of outside service providers for supplementary or accessory services and any disruptions in the outsourced activities, principally with respect to information technology and security, may have adverse effects on the Bank’s business.

An investment in the Bank’s common shares by foreign investors is limited to 20.0% of the total share capital of the Bank.

The President of Brazil may increase the maximum permitted levels of foreign ownership in Brazilian financial institutions by decree whenever such an increase is determined to be in the Brazilian national interest. On September 16, 2009, the President signed a Presidential Decree authorizing this increase of foreign ownership in the Bank’s capital stock to up to 20.0%.

Any increase in this limitation on ownership will depend on the enactment of a new decree by the President of Brazil, which is beyond the control of the Bank. Additionally, the Bank cannot predict the effects of this limit on foreign investors or which additional measures the federal government may take.

In the event that the current level of the Bank’s free float that is held by foreign investors approaches this 20.0% limit, the ability to resell to foreign investors shares of the Bank, and therefore the liquidity of such shares, may be adversely effected.

The Bank’s international operations are concentrated principally in Europe, United States of America, Japan and Latin America. Any changes in these countries’ economy may adversely affect the Bank’s business.

One of the Bank’s strategies is to expand internationally. Any adverse conditions in the economy of the foreign countries in which the Bank operates, either in Europe, North America, Latin America or Asia, may have

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effects on the Bank’s business. The main factors that may impact the Bank include a reduction in the volume of foreign trade operations of Brazilian companies established abroad, as well as of foreign companies that have a commercial relationship with Brazil, which causes a decrease in revenues and a consequent decrease in the income of the Bank’s international network. Depending on the market affected, the Bank’s customers’ profile and the nature of the economic disruption, the Bank may experience a decrease in the number of customers, which happens usually, but not solely, in the marketplaces where the Bank operates primarily with individuals. Another consequence would be a decrease in the spread of the operations that are maintained in a crisis scenario and that are directly affected by changes in interest rates, causing a reduction in income of the Bank’s network. Another risk factor that may affect the Bank’s profitability is related to changes to banking regulation of the countries in which the Bank operates.

Recently, the Bank acquired Banco Patagonia in Argentina and received authorization from the United States Federal Reserve to operate as a financial holding company. If the Bank continues to pursue its strategy of expanding its operations abroad, a change in the laws or regulations of the jurisdictions in which the Bank has international operations may result in a material adverse effect on the Bank’s operations in those jurisdictions.

Risks Relating to Brazil

Brazil’s economy remains vulnerable to external factors, which could have a material adverse effect on Brazil’s economic growth and on the Bank’s business and results of operations.

The disruptions recently experienced in the international capital markets have led to reduced liquidity and increased credit risk premiums for certain market participants and have resulted in a reduction of available financing. Financial institutions, such as the Bank, that are located in emerging market countries may be particularly susceptible to these events, which can affect the price and availability of their funding. Because international investors’ reactions to the events occurring in one market sometimes affect other regions or disfavor certain investments, Brazil could be adversely affected by negative economic or financial developments in other countries.

In addition, the recent market volatility and disruption have been accompanied by worsening economic data in the world’s major economies. Weakening economic conditions in Brazil may, in particular, impair the ability of some of the Bank’s clients to repay debt that they owe to the Bank and/or limit the Bank’s ability to execute its strategy in the same way that it would in a period of economic growth and stability. Accordingly, the Bank’s results of operations are likely to continue to be affected by conditions in the global financial markets as long as they remain volatile and subject to disruption and uncertainty.

The Bank is subject to influence by the Federal Government, and any change to the Bank’s strategy and policies that the administration makes could adversely affect its operations or prospects.

Significant changes to economic, fiscal or other policies set by the Federal Government could have a material adverse effect on the Brazilian economy and the Bank’s business and financial results.

The Federal Government appoints a majority of the members of the Board of Directors of the Bank. See “Management—Board of Directors.” In addition, the Federal Government and the Bank has authority to implement and have implemented certain measures intended to set compensation levels for the Bank for operations with the Federal Government. There can be no assurance that the Federal Government will maintain the current strategy and policies with respect to the Bank in the future. For instance, the Bank may be required to engage in subsidized lending, increase lending to less profitable sectors of the economy or otherwise adopt policies that negatively affect profitability or credit quality. Any change to the Bank’s strategy and policies could adversely affect the business, operations or prospects of the Bank.

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The market for Brazilian securities is subject to a high degree of volatility due to developments and perceptions of risks in other countries.

The market for securities issued by Brazilian companies is influenced by economic and market conditions in Brazil, as well as, to varying degrees, market conditions in other Latin American and emerging market countries, and the United States. Although economic conditions differ in each country, the reaction of investors to developments in one country may cause the capital markets in other countries to fluctuate.

Developments or economic conditions in other emerging market countries have at times significantly affected the availability of credit to the Brazilian economy and resulted in considerable outflows of funds and decrease in the amount of foreign investments in Brazil. Crises in other emerging market countries may diminish investor interest in securities of Brazilian issuers, including the Bank’s, which could adversely affect the market price of the Bank’s common shares.

The Federal Government exercises influence over the Brazilian economy and governmental actions may adversely affect the Brazilian markets and the Bank’s business.

The Brazilian economy has been affected by frequent and significant intervention by the Federal Government, which has often changed monetary, tax, credit, tariff and other policies to influence Brazil’s economy. Changes in banking services regulations, exchange controls, taxation and other policies could adversely affect the business and financial results of the Bank, as could inflation, currency devaluation, social instability and other political, economic and diplomatic developments, as well as the Federal Government’s response to such developments.

Uncertainty over whether the Federal Government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and in prices of securities of Brazilian issuers. The Bank cannot predict what future fiscal, monetary, social security and other policies will be adopted by the current Federal administration or future Brazilian administrations. The upcoming presidential elections and political and economic transition in Brazil may result in policy changes that may adversely affect the Bank’s business and financial results. The Bank cannot predict whether any future policies will result in adverse consequences to the Brazilian economy, the Bank’s business, results of operations or financial condition or prospects.

The Bank’s ability to make timely payments may be restricted by liquidity constraints in Brazil.

The Brazilian economy has been subject to a number of developments or conditions that have significantly affected the availability of credit. External factors, including the Russian economic crisis of 1998, the Brazilian economic crisis of 1999, the Argentine economic crisis in 2001, elections in Brazil in 2002 and the recent global financial crisis have from time to time resulted in significant outflows of funds and decreases in the amount of foreign currency being invested in Brazil. In addition, to control inflation in general, the Federal Government has maintained a tight monetary policy, with associated high interest rates, and has constrained the growth of credit. The combination of these developments has made it difficult for certain companies and financial institutions in Brazil to obtain cash and other liquid assets and has resulted in the failure of a number of weaker financial institutions in Brazil. In addition, concerns as to the stability of some financial institutions have caused significant transfers of deposits from smaller banks to larger banks since the beginning of 1995. No assurance can be given that these disruptions in the Brazilian economy will not adversely affect the ability of certain direct and indirect clients of the Bank to make timely payments on their obligations to the Bank or otherwise adversely affect the financial condition or results of operations of the Bank.

The profitability of the businesses of the Bank could be adversely affected by a worsening of domestic or global economic conditions.

The profitability of the Bank could be adversely affected by a worsening of general economic conditions domestically or globally. Factors such as interest rates, inflation, investor sentiment, the availability and cost of

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credit, the liquidity of the global financial markets and the level and volatility of equity prices could affect the activity level of clients. GDP growth in Brazil was (0.2%), 5.1%, 6.1% and 4.0% in 2009, 2008, 2007 and 2006, respectively. Average unemployment in Brazil was 8.9%, 7.9%, 9.3% and 10.0% as of December 31, 2009, 2008, 2007 and 2006, respectively, according to the estimates of the Brazilian Institute of Geography and Statistics ( Instituto Brasileiro de Geografia e Estatística or “IBGE”).

The Bank is subject to foreign exchange rate instability, including devaluation of the real, which may adversely affect the Bank.

In the past, the Federal Government implemented various economic plans and used a number of exchange rate policies, including sudden devaluations, periodic mini devaluations (during which the frequency of adjustments ranged from daily to monthly), floating exchange rate systems, exchange controls and dual exchange rate markets. More recently, the exchange devaluations have resulted in significant fluctuations in the exchange rate between the real and the U.S. Dollar and other currencies. As of December 31, 2009, the exchange rate between the real and the U.S. Dollar was R$1.74 per US$1.00, representing a 25.6% appreciation of the real since December 31, 2008, according to the Central Bank. On March 31, 2010, the exchange rate between the real and the U.S. Dollar was R$1.78 to US$1.00, according to the Central Bank. The Bank cannot be certain that the exchange rate between the real and the U.S. Dollar will stabilize at current levels.

As of March 31, 2010, approximately 15.4% of assets and 15.8% of the Bank’s liabilities were linked to the Euro, Japanese Yen, the United Kingdom pound and the U.S. Dollar. Depreciation of the real in relation to the U.S. Dollar may result in significant adverse effects on the Bank’s activities, since it increases the cost of foreign funding required for settling the Bank’s obligations expressed or indexed to the U.S. Dollar. Additionally, a depreciation of the real would also impair the ability of the Bank’s clients to pay their obligations expressed or indexed to the U.S. Dollar. Any depreciation would also reduce the U.S. Dollar value of distributions and dividends and the U.S. Dollar equivalent of the market price of the Bank’s common shares.

Depreciations of the real relative to the U.S. Dollar could also create additional inflationary pressures in Brazil that may adversely affect the Bank. Depreciations generally make it more difficult to access foreign financial markets and may prompt government intervention, including recessionary governmental policies. In contrast, appreciation of the real against the U.S. Dollar may lead to a deterioration of Brazil’s current account and the balance of payments, as well as to a dampening of export-driven growth. Any of the foregoing could adversely affect the Bank.

Exchange controls implemented by the Federal Government could adversely affect the business, operations or prospects of the Bank.

The purchase and sale of foreign currency in Brazil is subject to Central Bank regulation. The Central Bank currently authorizes the conversion of Brazilian currency into foreign currency in most situations, except in connection with certain regulated transactions including investments in the international capital markets and cross-border derivative contracts by consumers or companies.

The new Central Bank regulation maintained the following federal law requirements, among others:

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It is uncertain whether in the future the Federal Government will institute a more restrictive exchange control policy such as the provisions set forth in Law No. 4,131 of September 3, 1962. Many factors beyond the Bank’s control may affect the likelihood of the Federal Government’s imposition of such restrictions at any time. Among such factors are:

Any such restrictions may adversely affect the Bank’s business, operations or prospects and its ability to make payments in U.S. Dollars and other foreign currencies to meet its foreign currency obligations abroad under foreign currency-denominated liabilities.

If Brazil experiences substantial inflation in the future, there may be an adverse effect on the Bank’s results of operations and its financial condition.

In the past, Brazil has experienced high rates of inflation. Certain actions taken by the Federal Government to combat inflation have had negative effects on the Brazilian economy. Annual inflation rates were 8.9% in 1999, 6.0% in 2000, 7.7% in 2001, 12.5% in 2002, 9.3% in 2003, 7.6% in 2004, 5.7% in 2005, 3.1% in 2006, 4.5% in 2007, 5.9% in 2008 and 4.3% in 2009, respectively, as measured by the IPCA. The inflation rate for the first quarter of 2010 was 2.1%. The Federal Government’s measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and reducing economic growth. Inflation, along with government measures to combat inflation and public speculation about possible future government measures, has had significant negative effects on the Brazilian economy, and contributed to increase economic uncertainty in Brazil and heightened volatility in the Brazilian securities market, which may have an adverse effect on the Bank.

If Brazil experiences substantial inflation in the future, the Bank’s results of operations may be adversely affected, negatively impacting the Bank’s ability to comply with its obligations. Inflationary pressures could also reduce the Bank’s ability to access foreign financial markets and lead to further government intervention in the economy, including the introduction of policies that adversely affect the performance of the Brazilian economy as a whole, and consequently, the Bank’s operations.

New accounting policies requiring the transition to International Financial Reporting Standards (“IFRS”) may negatively affect the Bank’s financial results.

Law No. 11,638, published on December 28, 2007, and Law No. 11,941 of May 27, 2009 amended and restated the Brazilian Corporations Law thereby introducing the process of converting financial statements into IFRS. Accordingly, the Bank will change its accounting standard to IFRS for the year ended December 31, 2010.

Following the amendment, the Central Bank issued resolutions and adopted interpretative statements issued by the Accounting Standards Committee, CPC. The Bank has implemented these changes without significant effect on its financial statements and results.

The CPC has recently issued new interpretative statements that, if adopted by Central Bank, may materially affect the Bank’s financial statements, potentially impacting the Bank’s accounting results and dividend distributions.

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Risks Relating to the Bank’s Common Shares

The relative volatility and illiquidity of the Brazilian securities markets may substantially limit an investor’s ability to sell its common shares at the price and time it desires.

Investments in securities, such as the common shares, inherently pose risks due to fluctuations in price. Accordingly, by investing in the common shares, investors will be subject to the volatility of the capital markets.

Investing in securities in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers from more developed countries and such investments are generally considered more speculative in nature. The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more volatile than major U.S. and European securities markets. On December 31, 2009, the aggregate market capitalization of BM&FBOVESPA was equivalent to approximately R$2.3 trillion (US$1.3 trillion), with an average daily trading volume in the amount of R$5.3 trillion for the year ended December 31, 2009. There is significant concentration in the Brazilian securities markets. During the year ended December 31, 2009, the ten most actively traded issues represented approximately 44.8% of the total volume of shares traded on BM&FBOVESPA.

The Brazilian securities market may limit an investor’s ability to resell the Bank’s common shares at the price and time it desires, which may adversely affect the trading price of the Bank’s common shares.

The actual market price of the Bank’s common shares may fluctuate because of several factors, including those described in these risk factors or any other factors related to the Bank’s results of operations.

Investors may experience immediate dilution of their investment if they do not exercise their preemptive rights.

The Bank’s current shareholders will be entitled to preemptive rights, in accordance with Article 171 of the Brazilian Corporations Law and the Bank’s bylaws. If current shareholders do not exercise their preemptive rights, they will experience dilution of their shares in the Bank. In addition, in the future the Bank may offer additional shares and current shareholders may not receive preemptive rights with respect to those shares, and therefore their shares in the Bank could be further diluted. See “Dilution.”

Additionally, U.S. holders of the shares may not be able to exercise any preemptive rights in respect of shares held by them, unless a registration statement under the Securities Act is effective in respect to such rights or an exemption from the registration requirements thereunder is available. There can be no assurance that the Bank will file a registration statement or qualify for an exemption from the registration requirement under the Securities Act. If a U.S. holder of shares cannot exercise its preemptive rights, its investment in the Bank will be diluted. See “Dilution.”

Substantial sales of the Bank’s common shares in the future could cause the market price of the Bank’s common shares to decline.

The Brazilian National Treasury, the Bank’s Controlling Shareholder, is not subject to these restrictions and may freely transfer its shares at any time. Accordingly, if the Brazilian National Treasury decides to sell a part or the totality of shares issued by the Bank, the market price of common shares issued by the Bank may be adversely affected.

Holders of the Bank’s common shares may not receive any dividends.

The Bank’s by-laws set forth that the Bank must pay its shareholders a minimum mandatory semi-annual distribution equal to at least 25% of net income (as adjusted under applicable law) unless its board of directors decides otherwise and has the consent of its shareholders. Nonetheless, the Bank’s net income may be

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used to offset losses, increase the Bank’s capital stock or create reserves, as set forth in the Brazilian Corporations Law, and may not be made available for payment of dividends or distribution of interest on the Bank’s share capital. Additionally, the Bank may not pay dividends to shareholders in any year if the board of directors decides that the Bank has no net income (or accumulated profits) sufficient for distribution of dividends or that such payment would not be advisable in view of the Bank’s financial condition.

The terms of the Bank’s perpetual securities contain restrictions on the Bank’s ability to pay dividends and interest on capital and to redeem its shares.

In January 2006, the Bank issued perpetual non-cumulative junior subordinated securities in the aggregate amount of US$500 million (the “Perpetual Securities”). The terms of the Perpetual Securities allow the Bank to suspend its quarterly payments of interest and/or other non-principal payments on the Perpetual Securities if: (i) the Bank determines that it is, or that such payment would cause it to be, in breach of applicable capital adequacy requirements or below applicable financial ratio levels, (ii) the Central Bank or certain other governmental or regulatory authorities determine the suspension of payments of such charges; (iii) insolvency or bankruptcy events occur, (iv) certain events of default occur, or (v) the Bank elects to suspend such payment for any other reason.

In the event that the Bank elects to defer interest or other non-principal payments on its Perpetual Securities pursuant to item (v) above, the terms of the Perpetual Securities provide that the Bank may not recommend the payment of dividends to its Shareholders, to the fullest extent permitted by applicable law, and will be subject to restrictions on its ability to redeem or otherwise acquire its common shares.

Accordingly, holders of the Bank’s common shares may not receive dividends or interest on capital in addition to the mandatory minimum determined by legislation in force, as a result of the Bank’s election, pursuant to item (v) above not to make payments on its Perpetual Securities. The non-payment of these dividends and interest on invested capital may also adversely affect the stock market price of the Bank’s common shares.

The Bank may need to raise additional capital in the future through the issuance of securities, which could affect the price of the Bank’s common shares and dilute the ownership interests of investors.

The Bank may need to raise additional capital in the future through the public or private issuance of additional equity or convertible debt securities. Any such subsequent issuance of public or private equity or convertible debt securities could affect the price of the Bank’s common shares and have a dilutive effect on the book value of investors’ shares. See “Dilution.”

The issuance of shares arising from the conversion of Series C Warrants or any strategy to acquire other banks will cause a dilution in the investors’ ownership percentage and may adversely affect the market price of shares of the Bank.

The Bank may issue shares under its strategy to acquire/merge other banks in view of their merger into the Bank, which would also cause a dilution in the Bank’s shareholders’ ownership percentage. The Bank cannot estimate, as of the date of this reference form limited translation, if and when it will issue shares in view of such mergers or, if these shares are to be issued, their total amounts.

Accordingly, the market price of shares issued by the Bank may be adversely affected by any such possible dilutions, which would limit the investor’s ability to resell the shares at the desired price. See “Dilution.”

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Holders of the Bank’s common shares may face difficulties in serving process on or enforcing judgments against the banks and other persons.

The Bank is incorporated under the laws of Brazil, and all of the board members, executive officers and independent public accountants reside or are based in Brazil. Most of the Bank’s assets and those of these other persons are located in Brazil. As a result, it may not be possible for you to effect service of process upon the Bank or these other persons within the United States or other jurisdictions outside Brazil. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, investors may face greater difficulties in protecting their interests in the case of actions by the Bank or the Bank’s board of directors or executive officers than would shareholders of a U.S. corporation.

The protections afforded to minority shareholders in Brazil are different from those in the United States and may be more difficult to enforce.

Under Brazilian law, the protections afforded to minority shareholders are different from those in the United States. In particular, the legal framework and case law pertaining to disputes between shareholders and the Bank, its directors, its officers or its controlling shareholder, if any, is less developed under Brazilian law than U.S. law and there are different procedural requirements for bringing shareholder lawsuits, such as shareholder derivative suits, which differ from those you may be familiar with under U.S. and other laws. There is also a substantially less active plaintiffs’ bar dedicated to the enforcement of shareholders’ rights in Brazil than in the United States. As a result, in practice it may be more difficult for the Bank’s minority shareholders to enforce their rights against the Bank or its directors or controlling shareholders than it would be for shareholders of a U.S. company.

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EXCHANGE RATE INFORMATION

Prior to March 14, 2005, there were two legal foreign exchange markets in Brazil in which rates were freely negotiated but could be strongly influenced by Central Bank intervention:

On March 4, 2005, the CMN enacted Resolution No. 3,265, pursuant to which the commercial rate exchange market and the floating rate exchange market were unified in a sole exchange market, effective as of March 14, 2005. The new regulation allows, subject to certain procedures and specific regulatory provisions, the purchase and sale of foreign currency and the international transfer of reais by a foreign person or company, without limitation as to amount. However, the underlying transaction must be valid. Foreign currencies may only be purchased through financial institutions domiciled in Brazil and authorized to operate in the exchange market.

The real depreciated against the U.S. dollar by 15.7% in 2001 and 34.3% in 2002. Although the real appreciated 22.3%, 8.8%, 13.4%, 9.5% and 20.7% against the U.S. dollar in 2003, 2004, 2005, 2006 and 2007, respectively, in 2008, as a result of the international financial and economic crisis, the real depreciated against the U.S. dollar by 24.0%. In 2009, the real appreciated by 25.5% against the U.S. dollar. On March 31, 2010, the real /U.S. dollar exchange rate was R$1.7810 per US$1.00.

In the past, the Brazilian government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluation, periodic mini-devaluation during which the frequency of adjustments ranged from a daily to a monthly basis, floating exchange rate systems, exchange controls and dual exchange rate markets. The Bank cannot predict whether the Central Bank or the Brazilian government will continue to let the real float freely or intervene in the exchange rate market by returning to a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar. Exchange rate fluctuations may adversely affect the Bank’s financial condition and the market price of the Bank’s common shares. The Bank is subject to foreign exchange rate instability, including devaluation of the real , which may adversely affect the Bank.

The following tables provide information on the exchange rate, expressed in reais per U.S. dollar (R$/US$) for the periods indicated, as reported by the Central Bank.

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Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. The Bank cannot assure you that such measures will not be taken by the Brazilian government in the future.

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CAPITALIZATION

The following table sets forth the current and non-current liabilities and stockholders’ equity of the Bank as of March 31, 2010. The information set forth below in the column heading “Actual” is derived from the Bank’s unaudited consolidated financial statements as of March 31, 2010, prepared in accordance with Brazilian GAAP and included elsewhere in this reference form limited translation.

Prospective investors should read this table along with the sections “Selected Financial Information,” “Other Statistical and Financial Information,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the Financial Statements and notes thereto contained elsewhere in this reference form limited translation. From March 31, 2010 to the date of this reference form limited translation, there has been no material change in the capitalization of the Bank.

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DILUTION

As of March 31, 2010, the Bank’s consolidated stockholders’ equity was R$37,645.9 million and stockholders’ equity per common share was R$14.65. Stockholders’ equity per common share represents the consolidated net book value of the Bank’s stockholders’ equity, divided by the total number of common shares the Bank has issued.

The Bank has Series C Warrants outstanding in the amount of 5,880,483 as of March 31, 2010. The exercise of these warrants would result in an increase of approximately 7.16% of the stockholders’ equity interests. For further information, see “Description of Capital Stock” and “Risk Factors.”

In addition, the Bank’s current shareholders will be entitled to preemptive rights, in accordance with Article 171 of the Brazilian Corporations Law and the Bank’s bylaws. If current shareholders do not exercise their preemptive rights, they will experience dilution of their shares in the Bank. In addition, in the future the Bank may offer additional shares and current shareholders may not receive preemptive rights with respect to those shares, and therefore their shares in the Bank could be further diluted.

Additionally, U.S. holders of the shares may not be able to exercise any preemptive rights in respect of shares held by them, unless a registration statement under the Securities Act is effective in respect to such rights or an exemption from the registration requirements thereunder is available. There can be no assurance that the Bank will file a registration statement or qualify for an exemption from the registration requirement under the Securities Act. If a U.S. holder of shares cannot exercise its preemptive rights, its investment in the Bank will be diluted. For further information, see “Risk Factors—Risks Relating to the Bank’s Common Shares”.

An increase (or decrease) of R$1.00 in the price of R$25.78 per share, based on the closing price of the Bank’s common shares on BM&FBOVESPA on May 24, 2010 would increase (or decrease), after the conclusion of this offering: (i) the amount of the Bank’s shareholders’ equity by R$286.0 million; (ii) the shareholders’ equity per share by R$1.20; and (iii) dilution of the shareholders’ equity per share by R$10.93 for new investors, after the payment of fees and expenses as a result of this offering.

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MARKET INFORMATION

Shares

The Bank’s common shares are traded on BM&FBOVESPA under the “BBAS3” code. On March 31, 2010, the Bank had a total of 2,569,869,551 common shares. For further information, please see “Description of Capital Stock.”

Trading on the Brazilian Stock Exchanges

The common shares are traded on the BM&FBOVESPA, which is a closely-held company owned by Bovespa Holdings S.A., which is a publicly-held company. Trading on such exchanges is limited to brokerage firms and a limited number of authorized non-members with access to the BM&FBOVESPA negotiation system.

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The CVM and BM&FBOVESPA have discretionary authority to suspend trading in s hares of a particular issuer under certain circumstances. Trading in securities listed on BM&FBOVESPA, including the Novo Mercado and Levels 1 and 2 of Differentiated Corporate Governance, may be effected off the exchanges in the unorganized over-the-counter market in certain circumstances.

The common shares of all companies listed on BM&FBOVESPA, including the Novo Mercado and Level 1 and Level 2 segments are traded together.

Settlement of transactions occurs three business days after the trade date. Delivery of and payment for shares is made through the facilities of separate clearing houses for each exchange, which maintain accounts for the member brokerage firms. The seller is ordinarily required to deliver the shares to the clearing house on the third business day following the trade date. The clearing house for BM&FBOVESPA is the CBLC.

In order to reduce volatility, BM&FBOVESPA has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever specified indices of BM&FBOVESPA fall below the limits of 10% and 15%, respectively, in relation to the index levels for the previous trading session.

Although the Brazilian equity market is Latin America’s largest in terms of market capitalization, it is smaller and less liquid than the major U.S. and European securities markets. Moreover, BM&FBOVESPA is less liquid than the New York Stock Exchange and other major exchanges in the world. BM&FBOVESPA had a market capitalization of approximately US$1.33 trillion as of December 31, 2009 and an average monthly trading volume of approximately US$3.03 billion in 2009. In comparison, the New York Stock Exchange had a market capitalization of US$11.8 trillion as of December 31, 2009 and an average monthly trading volume of approximately US$70.6 billion in 2009.

Trading on Brazilian stock exchanges by non-residents of Brazil is subject to registration procedures. See “—Investment in the Common Shares by Non-Residents of Brazil.”

Regulation of Brazilian Securities Markets

The Brazilian securities markets are principally governed by Law No. 6,385, of December 7, 1976, and Brazilian Corporations Law, each as amended and supplemented, and by regulations issued by the CVM, which has authority over stock exchanges and the securities markets generally; the CMN; and the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.

These laws and regulations, among others, provide for licensing and oversight of brokerage firms, governance of Brazilian stock exchanges, disclosure requirements applicable to issuers of traded securities, restrictions on price manipulation and protection of minority shareholders. They also provide for restrictions on insider trading. However, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or securities markets in some other jurisdictions. Accordingly, any trades or transfers of the Bank’s equity securities by its officers and directors, the Bank’s controlling shareholders or any of the officers and directors of its controlling shareholders must comply with the regulations issued by the CVM, in particular CVM Instruction No. 358. See “Description of Capital Stock—Policy for internal release of information.”

Under Brazilian Corporations Law, a corporation is either public ( Companhia aberta ) , such as the Bank, or closely held ( Companhia fechada ) . All public companies are registered with CVM and are subject to reporting requirements. The common shares are listed with the Novo Mercado of BM&FBOVESPA, the rules of which impose stricter disclosure requirements than the standard BM&FBOVESPA listing.

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The Bank has the option to ask that trading in securities on BM&FBOVESPA be suspended in anticipation of a material announcement. Trading may also be suspended on the initiative of BM&FBOVESPA or the CVM, based on or due to, among other reasons, a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to inquiries by the CVM or BM&FBOVESPA.

The Brazilian over-the-counter market consists of direct trades between individuals in which a financial institution registered with the CVM serves as intermediary. No special application, other than registration with the CVM, is necessary for securities of a public company to be traded in this market. The CVM requires that it be given notice of all trades carried out in the Brazilian over-the-counter market by the respective intermediaries.

Investment in the Common Shares by Non-Residents of Brazil

Investors residing outside Brazil are authorized to purchase equity instruments, including the common shares, on BM&FBOVESPA provided that they comply with the registration requirements set forth in CMN Resolution No. 2,689/00 and CVM Instruction No. 325.

With certain limited exceptions, CMN Resolution No. 2,689/00 investors are permitted to carry out any type of transaction in the Brazilian financial capital markets involving a security traded on a stock, future or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under the common shares are made through the commercial rate exchange market.

In order to become a CMN Resolution No. 2,689/00 investor, an investor residing outside Brazil must:

Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689/00 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by CVM.

Please refer to “Taxation” for a description of the Brazilian tax consequences to an investor residing outside Brazil of investing in the common shares.

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SELECTED FINANCIAL INFORMATION

The following financial data should be read in conjunction with the Financial Statements and the accompanying notes, “Presentation of Financial and Other Information,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this reference form limited translation. The Bank’s Financial Statements have been prepared in accordance with Brazilian GAAP as described in “Presentation of Financial and Other Information.” See “Risk Factors—Risks relating to the Bank and the Brazilian Banking Industry.” Changes in accounting practices adopted in Brazil due to its convergence with international accounting practices (IFRS) may adversely affect the Bank’s financial results.

The results of operations, assets and liabilities of BESC and BESCRI were included in the Bank’s consolidated financial statements from September 30, 2008, the date the merger was consummated. The assets and liabilities of Nossa Caixa were consolidated into the Bank’s balance sheet as of March 31, 2009, and the results of operations of Nossa Caixa were included in the Bank’s consolidated financial statements as from April 1, 2009.

The assets and liabilities of Banco Votorantim, in proportion to the Bank’s share in total capital stock, have been consolidated into the Bank’s balance sheet as of December 31, 2009. The proportional share of income and expenses of Banco Votorantim was consolidated into the Bank’s financial statements as from October 2009.

In addition, as a result of the implementation of the new accounting policies in response to Law No. 11,638, the Bank’s consolidated financial statements as of and for the years ended December 31, 2009 and 2008 are not directly comparable to those as of and for the year ended December 31, 2007.

In this reference form limited translation, tables containing financial information contain, except where otherwise indicated, consolidated financial information of the Bank. The Bank’s average volume and balance data has been calculated based upon the average of the month-end balances during the relevant period.

Solely for the convenience of the reader, real amounts as of March 31, 2010 have been translated into U.S. dollars at the exchange rate as reported by the Central Bank on March 31, 2010, of R$1.7810 to US$1.00. The U.S. dollar equivalent information should not be construed to imply that the real amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate.

Consolidated Balance Sheet Data—Assets

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